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You should push back with your homeowner's insurance - this was a dangerous condition on your property, and you (and your insurance company) are most likely responsible for it whether you knew about it or not.
Based on the information in your question, it would appear that your insurance company is correct. If you are sued by the driver in small claims court, you should immediately notify your homeowners insurance carrier, which will then provide a defense for you and pay any judgment in the event one is ever entered against you.